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FEC poised to issue advisory opinion on use of bitcoin in campaign donations

The Mt. Gox bitcoin exchange in Tokyo is headed for liquidation after a court rejected its bankruptcy protection application. Mt. Gox said Wednesday, April 16, 2014, the Tokyo District Court decided the company, which was a trading platform and storehouse for the bitcoin virtual currency, would not be able to resurrect itself under a business rehabilitation process filed for in February. This April 3, 2013 file photo shows bitcoin tokens in Sandy, Utah. (AP Photo)

WASHINGTON — The Federal Election Commission appears poised to rule on whether and how campaigns and PACs can accept bitcoins as political contributions. The news comes as Attorney General Greg Abbott’s campaign for governor announced Wednesday that he will accept contributions made in bitcoin.

Two draft advisory opinions have been posted to the FEC website for public comment ahead of the commission’s April 23 meeting.

The first draft, posted Tuesday, would broadly authorize the use of bitcoins not as cash donations, but as in-kind donations, much as stocks and bonds and similar instruments are accepted today. They also could be used to pay campaign bills, provided vendors would accept the novel currency. They could also be deposited into the PAC’s bitcoin digital wallet and kept their to be spent or sold later. The PAC could also use cash to buy additional bitcoins itself, but those coins could only be treated as investments and not as means to pay bills or otherwise transferred. It would also require that the identity of the donor would have to be known and recorded before the donation could be accepted.

But a second draft posted Wednesday contains language that would greatly restrict the use of bitcoins. The bitcoins could be accepted but would have to be converted to cash before they could be exchanged for anything of value, and the cash would have to be deposited in the PACs contribution account. The second draft would also impose a $100 maximum value on how much the bitcoins any one donor gives to a campaign during any one election cycle.

Cornyn’s team had responded by saying that Stockman’s decision to accept bitcoins was contrary to law, but nothing on the books made clear that such donations couldn’t be made. The question was how to treat them — as a money donation or as an in-kind donation?

Donors give things to campaigns that aren’t money but have value all the time, from flower arrangements, to pizza, to event space. It’s just the rules for how to use the donations varies depending on whether they are made in cash or in-kind.

The practical impact of bitcoina on elections is not likely to be large. With $100 per donor per campaign limit, the capacity for bitcoin donations to make a big difference to campaigns is small. Instead, accepting the contributions is more about energizing the community of enthusiasts who have embraced the crypto-currency as a way to push back against what some see as government intrusion in private financial affairs. Under normal circumstances, the use of bitcoin as a currency carries with it a level of anonymity that, while imperfect, is far greater than what banks offer.

On Wednesday, Abbott said: ““I’m excited to see our campaign add another tool to our cutting-edge digital outreach, which is allowing us to reach more Texans than any previous campaign in the state,” said Greg Abbott. “The spirit of Bitcoin embodies the free market principles that make Texas a leader in innovation and entrepreneurship. We welcome the Bitcoin community to join our team.”

But the push to make bitcoin more accepted as a currency has been strong, and advocates have found a strong source of supprt among libertarian leaning candidates. Stockman, who has kept a low profile since his election loss, has been a champion for bitcoin more broadly, announcing at an April 7 conference of bitcoin enthusiasts in New York that he would introduce a bill requiring the IRS to treat bitcoin as a currency — rather than as property — for tax purposes.

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The blog for the Dallas Morning News politics team tracks Dallas Fort Worth area, Texas and national campaigns.